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TMI Blog2013 (11) TMI 1280X X X X Extracts X X X X X X X X Extracts X X X X ..... p; b) To promote and advance the social, cultural economic, educational, physical and spiritual progress and development of the members of the Samaja. c) To promote educational institutions such as schools, colleges and professional colleges of Medical, Engineering, Agriculture and other allied subjects. To promote higher education and to impart training and competence to the youth for entry in Civil and Defence services and to provide them with placement services. d) To Provide for Construction and running of community halls, auditorium, Open air theatres, Schools, Colleges, Social service camps, Hospitals, Nursing Homes, Old age homes, Working women's and Student hostels, Sports and Games Centers, social and Cultural Centers for the benefit of the Kodava Community in particular and the General Public at large. e) To promote Social Welfare, Health Care, Employment opportunities, Infrastructure development, Resettlement of Ex-Servicemen, Para Military personnel, War Widows, Disabled and to support those who are in financial need in Kodava Community and the general public at large. f) To promote Sports, recreation clubs, librar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its members. In this regard, he has examined the income & expenditure account of the assessee for the year ended 31.03.2009 & 31.03.2010, from which he found that the excess of income over expenditure of the assessee was Rs.63,61,403 for A.Y. 2009-10 and Rs.82,54,493 for A.Y. 2010-11. The DIT(E) therefore issued a show cause notice dated 22.11.2011 calling upon the assessee to show cause as to why the registration already granted to it u/s. 12A of the Act should not be cancelled. 5. In reply, the assessee submitted that its objects were charitable in nature and has already been accepted to be so by the revenue by granting certificate of registration u/s. 12A of the Act. The assessee also submitted that marriage hall was let out by the assessee to all persons irrespective of their caste or religion. The assessee also submitted that letting out of properties and deriving income therefrom cannot be treated as business income and in this regard, relied upon the following decisions:- (i) CIT v. Sengunthar Thirumana Mandapam (2008) 298 ITR 330 (Mad) (ii) CIT v. Sri Rao Baghadur ADK Dharmaraja Educational Charity Trust (2008) 300 ITR 365 (Mad) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8/- from sale of Liquor, Rs.3,70,002/- from sale of soda soft drinks etc., room rent Rs.8,36,480/- and card room collection Rs.2,57,531/-. Similarly, in the FY:2009-10 also there are substantial receipts from these activities. Some of the predominant activities of Samaja are evidently running of bar/restaurant and renting out of the rooms to its members/their guests and from letting out of choultry on daily basis. The Samaja's contention that letting out of choultry is not business activity and proviso to section 2(15) of the Act are not applicable is not acceptable." 9. The DIT(E) also distinguished the cases relied upon by the assessee. The DIT(E) was of the view that the decision of Hon'ble Madras High Court in the case of Sengunthar Thirumana Mandapam (supra), was a case of where the question involved was utilization surplus funds for other charitable purposes. Similarly, he held that the decision of the Madras High Court in the case of Sri Rao Bahadur ADK Dharmaraja Educational Charity Trust (supra) was a case, where the letting out of property was on lease basis and not on daily basis whereas in the case of the Assessee letting of the property was on a daily basis. On simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DIT and that the two conditions laid out in section 12AA(3) should be satisfied before registration granted can be cancelled. 12. The ld. counsel for the assessee also reiterated other contentions put forth by the assessee before the DIT(E) with regard to the nature of income from letting out the kalyana mantap, education being one of the main activities of the assessee, supply of liquor being not income chargeable to tax on the principle of mutuality, etc. 13. Besides the above, our attention was also drawn to the decision of the ITAT, Bangalore Bench in the case of Karnataka Badminton Association v. DIT(E), ITA No.1272/Bang/2011, order dated 22.11.2012, wherein an identical issue has been considered by the Tribunal. 14. The ld. DR, on the other hand, relied on the order of the DIT(E). He also relied on the decision of the Hon'ble Andhra Pradesh High Court in the case of Andhra Pradesh State Seed Certification Agency v. CCIT, [2012] 28 Taxmann.com (AP). In this decision, the Hon'ble Andhra Pradesh High Court considered the claim made by an assessee with regard to rejection of an application for approval u/s. 10(23C)(iv) of the Act, which provides for exemption from tax of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2(15) of the Act. As can be seen from the later part of this order, by reason of the statutory amendment to the definition of "Charitable Purpose" u/s.2(15) of the Act by insertion of a second proviso, by the Finance Act, 2010 with retrospective effect from 1.4.2009, even if there are receipt from commercial activities, if below Rs.25 lacs will still be considered as "Charitable Purpose". Besides the above, it is not open to the DIT(E) in an action u/s. 12AA(3) of the Act to examine the objects of the trust to see if the same were charitable in nature. That has already been done when a registration was granted to the assessee u/s. 12AA(1) of the Act. It is not open to the DIT(E) to re-examine the objects of the trust in proceedings u/s.12AA(3) of the Act. The decisions relied upon by the ld. counsel for the assessee in this regard support the plea of the assessee. 18. With regard to rental income from letting out the community hall, we are of the view that the decision of the Madras High court squarely supports the plea of the assessee that they cannot be regarded as business income. In our view, DIT(E) has distinguished those decisions relied upon by the assessee on rather flims ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tration already granted to a trust by invoking section 12AA(3) of the Act, as held by this Tribunal in the case of Karnataka Badminton Association v. DIT(E), ITA No.1272/Bang/2011, order dated 22.11.2012. The Tribunal in the aforesaid decision took the view that a further proviso was introduced to the provisions of Sec.2(15) of the Act, by the Finance Act 2010 with retrospective effect from 01-04-2009, which provided as follows; "Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakh rupees or less in the previous year". The Tribunal took note of the Memorandum explaining the provisions of Finance Bill 2012 (reported in 343 ITR 234 (stat.) at pages 286 & 287) wherein while explaining the rationale behind the introduction of second proviso to Sec.2(15) of the Act, it has been mentioned as follows; " Assessment of charitable organization in case commercial receipts exceed the specified threshold Sec.11 and 12 of the Act, exempt income of any charitable trust or institution, if such income is applied for charitable purposes in India and such institutio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, proposed to amend Sec.10(23C), sec.13 and sec.143 of the Act to ensure that such organization does not get benefit of tax exemption in the year in which it's receipts from commercial activities exceed the threshold whether or not the registration or approval granted or the notification issued is cancelled, withdrawn or rescinded. This amendment will take effect retrospectively from 1st April, 2009 and will, accordingly, apply in relation to the assessment year 2009-10 and subsequent assessment years". (emphasis supplied) The Tribunal took note of the submission on behalf of the Assessee that the aggregate value of the receipts from commercial activities in a particular year might exceed a prescribed limit of Rs.10.00 lakhs (which was the limit prior to 01-04-2012) which was enhanced to Rs.25.00 lakhs with effect from 01-04-2012. The Tribunal took the view that if, in a particular year, the receipts from commercial activities, is less than the limit prescribed above, then not withstanding the fact that the charitable organization is carrying on activity in the nature of trade or commerce or business, it would still be entitled to the benefit u/s.11 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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